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Managed results...your Fired?
Old 07-21-2017, 07:55 PM   #1
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Managed results...your Fired?

I'm monitoring the results of a relatives portfolio, and the 2014, 2015 & 2016 net results are as follows: 3.33%, -1.82%, and 4.29% respectively. Granted the portfolio has an oil and bond heavy weighting. But with discretionary accounts, and me saying their is a concentration of risk shouldn't they have changed it?
This is a managed account, so the results are net of fees.
The owner is presently 82.

Thoughts?
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Old 07-21-2017, 08:37 PM   #2
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The owner likes oil and bonds?

My broker hates oil & bonds.

The results speak for a bag of oil & bonds.
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Old 07-21-2017, 08:55 PM   #3
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What's the AA? What are the fees? How dependent is the owner on the portfolio (maybe they get by on pension and SS, and this is just 'gravy')?

I can understand the "granted..." for the bond component, we don't want to compare that to say, 100% S&P 500. But "granted..." for being heavy in oil? Why would an 82 YO be heavy in any specific sector? Or anyone, for that matter?

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Old 07-21-2017, 09:24 PM   #4
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Originally Posted by ERD50 View Post
What's the AA? What are the fees? How dependent is the owner on the portfolio (maybe they get by on pension and SS, and this is just 'gravy')?

I can understand the "granted..." for the bond component, we don't want to compare that to say, 100% S&P 500. But "granted..." for being heavy in oil? Why would an 82 YO be heavy in any specific sector? Or anyone, for that matter?

-ERD50
Maybe it is the dividends the stocks provide?
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Old 07-21-2017, 09:26 PM   #5
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How did the portfolio perform in 2007 and 2008?

A lot depends on the size of the portfolio, life expectancy of the owner, and any outstanding obligations the owner may have.
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Old 07-21-2017, 09:28 PM   #6
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Maybe it is the dividends the stocks provide?
This is a good point. There is just not enough information to say whether this is good or bad, or just OK.
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Old 07-21-2017, 09:47 PM   #7
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Quote:
Originally Posted by Luck_Club View Post
I'm monitoring the results of a relatives portfolio, and the 2014, 2015 & 2016 net results are as follows: 3.33%, -1.82%, and 4.29% respectively. Granted the portfolio has an oil and bond heavy weighting. But with discretionary accounts, and me saying their is a concentration of risk shouldn't they have changed it?
This is a managed account, so the results are net of fees.
The owner is presently 82.

Thoughts?
Seems like your relative can easily get better results with less risk by investing in Wellington or Wellesley.
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Old 07-21-2017, 10:20 PM   #8
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Originally Posted by Luck_Club View Post
I'm monitoring the results of a relatives portfolio, and the 2014, 2015 & 2016 net results are as follows: 3.33%, -1.82%, and 4.29% respectively. Granted the portfolio has an oil and bond heavy weighting. But with discretionary accounts, and me saying their is a concentration of risk shouldn't they have changed it?
This is a managed account, so the results are net of fees.
The owner is presently 82.

Thoughts?
He beat inflation, whats his goal?
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Old 07-21-2017, 10:33 PM   #9
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Maybe it is the dividends the stocks provide?
OK, I see your point. But I'm a total return kinda guy. Money is fungible, so it doesn't matter if it's divs or NAV. Take it in divs, take in selling stock, or a combo, it's all the same (other than tax details).

But that's another discussion that's gone round and round here before. As other's have said, we need more details to really say much else.

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Old 07-22-2017, 12:15 AM   #10
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Maybe it is the dividends the stocks provide?
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Originally Posted by ERD50 View Post
OK, I see your point. But I'm a total return kinda guy. Money is fungible, so it doesn't matter if it's divs or NAV. Take it in divs, take in selling stock, or a combo, it's all the same (other than tax details).

But that's another discussion that's gone round and round here before. As other's have said, we need more details to really say much else.

-ERD50
So the originally quoted returns include dividends? Then, rather than saying heavy in bonds and oil, I'd like to know a more specific percentage. However, oil and to a lesser extent, bonds, have taken a hit these past few years. So 1/3rd in bonds and oil?

Don't fully agree that money is fungible in this case. One could hold oil stocks and bonds and live off the dividends even as the price goes down. Bonds will eventually mature and oil stocks have always been volatile. Chevron and Exxon-Mobil are both Dividend Aristocrats so while not as secure as bonds, their dividends are very reliable.
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Old 07-22-2017, 05:22 AM   #11
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He would have done better to index the equities and pay no fee.
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Old 07-22-2017, 06:38 AM   #12
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Yes it is mainly dividend yield. The one negative year the loss in value was about 15% more than the dividends produced when you add in the fees it came out to be almost 50% more than the dividends produced.
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Old 07-22-2017, 06:53 AM   #13
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The owner likes oil and bonds?

My broker hates oil & bonds.

The results speak for a bag of oil & bonds.

What does your broker recommend (instead of bonds) for fixed-income investment?
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Old 07-22-2017, 08:45 AM   #14
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So the originally quoted returns include dividends? ...
It should. "Net Results" means just that. Dividends are part of your results.

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... Don't fully agree that money is fungible in this case. ...
Sorry, but I guess I'm just getting too old and too aware that life is too short to argue facts with anyone. Money is fungible, that is a fact. Look it up. It isn't conditional.

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... One could hold oil stocks and bonds and live off the dividends even as the price goes down. ...
Yes. So?

One could sell off a few percent of a rising (or falling - but likely more stable than oil, as seen in this example) broad-based stock index fund (that's kicking off ~ 2% divs).

There's no free lunch, if a group of stocks pays higher divs, you are giving up some appreciation, accepting more risk/volatility, or something. Else everyone would buy those stocks, driving up the price and eliminating the alpha!

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Old 07-22-2017, 09:07 AM   #15
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True enough that money is fungible, however, stocks and returns on stocks are not money. Stocks and their returns are highly volatile, but if the dividend stream is all he's after, the return is less relevant. I agree there may be better ways to do it, but if dividend income was the objective, then the plan may be working as desired.

My concern mentioned in this thread is the mention of fees. Volatility is one thing, but the fee burden is not volatile, it just sucks money off the top.
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Old 07-22-2017, 09:39 AM   #16
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I'm monitoring ... me saying their is a concentration of risk shouldn't they have changed it? ...
As usual I agree with most of what ERD50 has been saying. But what is your status with respect to the account? Are you an owner, do you have a power of attorney? If neither, then you are just background noise and the advisor will have little or no interest in your opinions.

If you do have authority, use it to either pull the account (which would be my preference if it were me) or to direct the AA to something that you think is more appropriate. You are the customer.

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Originally Posted by ERD50 View Post
What's the AA? What are the fees? How dependent is the owner on the portfolio (maybe they get by on pension and SS, and this is just 'gravy')? ...
This is really important. Without this information it's basically impossible to advise any particular action. IOW, what problem are you trying to solve?
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Old 07-22-2017, 09:44 AM   #17
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Yes it is mainly dividend yield. The one negative year the loss in value was about 15% more than the dividends produced when you add in the fees it came out to be almost 50% more than the dividends produced.
I just caught this. If the fees moved the loss from 15% of the dividend income to 50% of the dividend income, my third-grade math tells me that the fees were 35% of dividend income. Right? Offhand, it sounds like your friend is getting raped. Is this one of the storefront bandits like Eddie Jones?
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Old 07-22-2017, 10:23 AM   #18
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I just caught this. If the fees moved the loss from 15% of the dividend income to 50% of the dividend income, my third-grade math tells me that the fees were 35% of dividend income. Right? Offhand, it sounds like your friend is getting raped. Is this one of the storefront bandits like Eddie Jones?
It is Raymond James, and the fee is around 1.2% of end of year portfolio value. That is kind of what I'm coming to the conclusion of as well.

I don't hold POA, but the broker is working with me while my relative is incapacitated without a proper POA. This is because the broker knew my relative was working on assigning the role to me prior to becoming incapacitated.

Div yield pre fee is about 3.4%-3.6%. so the fee is taking 30% of the div yield.
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Old 07-22-2017, 10:37 AM   #19
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What does your broker recommend (instead of bonds) for fixed-income investment?
He doesn't. He knows I have muni's with other firms.
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Old 07-22-2017, 10:50 AM   #20
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It is Raymond James, and the fee is around 1.2% of end of year portfolio value. That is kind of what I'm coming to the conclusion of as well.

I don't hold POA, but the broker is working with me while my relative is incapacitated without a proper POA. This is because the broker knew my relative was working on assigning the role to me prior to becoming incapacitated.

Div yield pre fee is about 3.4%-3.6%. so the fee is taking 30% of the div yield.
Sticky. Does your relative have an attorney? (a) the broker should not be taking direction from you; it exposes him to legal liability if other heirs sue him for breach of fiduciary duty. (b) you, too, are in a bad spot if you are not the sole heir and someone wants to sue.

If your relative is physically incapacitated but mentally OK, you should get a POA signed in the presence of his/her lawyer, who can subsequently confirm mental competence and no undue influence if the POA is ever questioned. If not mentally competent, maybe the lawyer can help you somehow to get a court order.

Re Raymond James, probably they will not win any popularity contests on this forum. But until you have legal authority you are basically stuck with them.

Re 1.2% In my experience that would be a high wrap fee on any account $1M or larger.
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